After the markets closed on Tuesday, June 13, VeraSun (NYSE: VSE), the South Dakota-based ethanol producer, and its bankers sat down to price their deal. They were sailing into troubled waters.
That day, all the major stock market indexes had closed at a loss for 2006. The Dow Jones Industrial Average was down 0.11 percent for the year, the Nasdaq Composite Index was down 6.02 percent and the S&P 500 was down 1.97 percent.
A cloud had rolled over the Land of IPOs in the aftermath of the highly publicized Vonage Holdings (NYSE: VG) IPO fiasco. That and a Nasdaq Composite Index, which had fallen 12.6 percent in the last two months, had curbed investors’ appetite for IPOs.
Consider this: By Tuesday’s close, five of the six companies that had gone public in June had been forced to cut their offering terms to get them out the door. The last was Verigy Ltd. (Nasdaq: VRGY), the Singapore-based semiconductor equipment supplier. It had been priced the evening before, traded that day and flopped. Verigy was priced below its filing range and closed its opening day as a broken deal -– BELOW its IPO price.
Bankers offered 8.5 million shares of Verigy at $15 per share, down from $16 to $18 per share, its original filing range. The IPO opened at $15.05 per share, tanked to $13.55 and recovered to close at $14.25, down 5 percent from its initial offering price.
A Break in the Clouds
Against this backdrop, it was batter up in the old IPO ballgame and the VeraSun deal stepped up to the plate to take a swing.
Even though the VeraSun IPO had already been increased to 18.3 million shares at $21 to $22 each, up from 17.3 million shares at $18 to $21 each, people were understandably nervous.
Bankers were cautiously optimistic when they priced VeraSun at $23 per share, a slight premium over its increased filing range.
To reiterate: By Tuesday’s close, the stock market had finished on the year’s low. The Verigy IPO priced the day before had done a belly flop in the aftermarket. And a few people were too scared to open their eyes when VeraSun started trading on the New York Stock Exchange on Wednesday morning.
Not to worry.
VeraSun opened at $28 per share and closed its opening day at $30, UP 30.4 percent above its initial offering price.
The Summer of 2006 was on.
A Baker’s Dozen
This week, bankers plan to price four deals (please see IPO calendar for the week of June 19) and the following week, ahead of the July 4th Holiday, the calendar is open for business with nine deals. That adds up to a baker’s dozen, if all 13 deals get done.
That is not a misprint. Bankers plan to price nine – count ‘em! – nine IPOs during June’s final week.
Don’t take an early vacation. It should be worth sticking around for.
Topping the list for the week of June 26 are Aventine Renewable Energy Holdings (NYSE: AVR proposed) an Illinois-based ethanol producer, GMarkets (Nasdaq: GMKT proposed), a South Korean e-ecommerce retail marketer, and J. Crew Group (NYSE: JCG proposed), the New York City-based clothing merchant whose brand is a preppy icon.
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